Both the water and split-screen effects rely on horizontal interrupts, and the game isn't programmed to account for both effects at once. The interrupt handler itself decides which effect to use based on whether you're in two-player mode, and the game as a whole only ever prepares for a single horizontal interrupt. To get both effects working, you'd have to include some extra logic to calculate when each of the interrupts is supposed to happen (i.e. on which scan line), as well as what each interrupt is supposed to do. Ideally you'd do this outside the interrupt handler, since you don't want to waste time on anything other than data transfers there. This was actually a topic in the community a few years ago, whether it was even possible to do up to three full palette transfers each frame.